Incentive mechanisms to enforce sustainable forest exploitation

Abstract

Using a two-player differential game approach, this paper deals with the issue of tropical deforestation. The assumption is that developing forestry countries (called the South) do not, or cannot, necessarily have the same utility for forest conservation than the developed countries (called the North). Given the global nature of the problem, we assume that it may be wise that the North offers financial support to the South to help in achieving a sustainable forest policy. We derive sustainable and short-run deforestation policies and provide a transfer mechanism which insures that the South will indeed implement the sustainable one.

Cooperation for sustainable forest management: An empirical differential game approach

“…A number of papers in the dynamic game literature (e.g. van Soest and Lensink (2000), Fredj et al (2004Fredj et al ( , 2006, Martín-Herrán and Tidball (2005) and Martín-Herrán et al (2006)) have looked at the conditions necessary to build environmental agreements that are both credible and sustainable when it comes to stopping deforestation. In these papers the environmentally aware players (non-forest-owners) are willing to compensate forest owners in order to have deforestation reduced.…”

“…Eq. (2) is an extension of van Soest and Lensink (2000) and Fredj et al (2006), where A = η = 0 in the first and A = 0 in the second. Note that the linear specification in Eq.…”

“…There is also a literature that deals with forest depletion using a dynamic-game approach (e.g., van Soest and Lensink (2000), Fredj et al (2004Fredj et al ( , 2006, Martín-Herrán and Tidball (2005) and Martín-Herrán et al (2006)). In these articles the players are forest owners, who exploit their asset to obtain economic revenues; and a donor community, or an environmentally aware player, who is willing to compensate forest owners who engage in preservation efforts of the resource.…”

Dynamic Games in the Economics and Management of Pollution

“…If North's budget for subsidies is sufficiently large, it can design a subsidy scheme which slows down deforestation. Fredj et al [81] study the same problem and characterize both short-term (finite-horizon) and infinite-horizon sustainable deforestation policies. North can design a subsidy mechanism such that it is in the best interest of the South to follow in the short run the sustainable exploitation path of its forest.…”

Developments in differential game theory and numerical methods: economic and management applications

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